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LATEST NEWS UPDATES | Organic food fails to move cash registers for retailers-Writankar Mukherjee

Organic food fails to move cash registers for retailers-Writankar Mukherjee

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published Published on Feb 11, 2013   modified Modified on Feb 11, 2013
-The Economic Times

Brands may be spending million to promote an eco-friendly-image, but when it comes to actual sales, organic and 'planet-friendly' products have failed to move cash registers for retailers, whether it's fresh produce, groceries or even clothing.

Top food retailers like Future Group, Reliance Retail and Spencer's Retail say sales from organic vegetables, fruit and food products account for less than 2 per cent of total food sales, even three or four years after their launches.

ITC has pulled a range of organic spices from the market, and apparel brands and retailers like Madura Fashion & Lifestyle and Woodland, which launched eco-friendly fabrics have seen tepid response to these products as well. "Eco-friendly products have remained a feel-good and talked-about factor in India, rather than generating hardcore revenue," says Spencer's Retail chief executive Mohit Kampani.

Kampani says Spencer's will continue to stock these products - but only to ensure that its stores offer a full range, since organic lines only contribute around 0.5 per cent to the total food sales. A senior Reliance Retail official said the company has started to prune down its organic food range in several Reliance Fresh stores, since sales were nowhere close to expectations.

Retailers say there are problems with the supply chain of organic products in India, since all products are not always available. And the price premium, which can be 50-70 per cent of regular prices, is certainly deterring consumers.

For some products like organic ghee, the price is just double than the regular range and for honey it is almost three times.
 
As a result, herbal FMCG maker Himalaya has launched its organic range only in the US and Europe, and has no plans to launch it in India.

ITC's divisional chief executive (food) Chitranjan Dar says apart from the price premium, Indian consumers find organic food not as fulfilling as the non-organic product. "In organic food, you have to sacrifice certain qualities. For instance, the turmeric is not as yellow or the chilli powder not as red as the usual. And consumers also think there is no point buying just few organic products at a premium when rest of the products they consume is non-organic," says Dar.

It's not just food products - organic cotton, which is a fast-growing, though nice market abroad, is not even a 'micro-niche' market in India, says Madura Fashion & Lifestyle's Allen Solly brand head Sooraj Bhat. Madura had launched organic cotton products under its Van Heusen brand, but it's now slowed down its plans to expand the category.

"There is a clear cost associated with these products, which is a premium of around 20-30 per cent over regular garment and hence the market has not picked up. There are also processing issues since organic cotton lends itself more to casual clothing more than formal wear due to its texture," says Bhat. Amit Ladsaria, director of apparel brand, Turtle, says it plans to launch an organic range - but more as "a talking point in the stores," which shows the brand at the cutting edge of new products, rather than to drive sales.

So while other eco-friendly initiatives such as moving to paper or jute carry bags instead of plastic, recycling old packaging boxes, and encouraging shoppers to bring their own bags to stores have been popular with consumers, brands and retailers are still far away from making money out of selling organic-branded products.

HOPE REMAINS

However, the eco-friendly industry feels that it's still better off than the 'health' industry - brands like PepsiCo and Parle have actually withdrawn some of their health products in India due to poor market response, as Indian consumers preferred taste to health.

Future Group's president (Food Bazaar) Devendra Chawla says eco-friendly products, especially organic food, may become more prominent in another 2-3 years as retailers develop the categories jointly with the brands.

"Yesterday's products won't bring in tomorrow's consumer. With many brands peaking, their replacements have to be constantly sought, and small categories like organic food will have a future," he says.

Dar of ITC thinks the adoption of organic products would first start with staples such as organic vegetables and fruits.

"It's how organic products have become successful internationally. Once this market matures, the awareness and value of organic and eco-friendly products would pick up in India," he says.

WAY TO GO ON RECYCLING

It's not just the consumer brands who have failed in pushing environment-friendly products. Even electronic companies and computer makers have failed to promote recycling electronic waste or old machines.

"The computer industry has absolutely drawn a blank in e-waste recycling despite launching in India for three years now," says Acer India chief marketing officer S Rajendran. "Indian consumers try to derive value from every old product they have and hence wants some inherent value out of recycling. However, with thin margins on sales, it is not possible to provide such value," he says.

Nokia India is an exception having collected and recycled over 15 lakh old mobile phones and accessories from consumers since launch of the recycling campaign in India in 2009. The company, however, provides an incentive to the consumers - a surprise gift for every handset, regardless of the brand recycled.

"Around 44 per cent of old mobile phones are lying in drawers at home and not being recycled. If every mobile phone user across the world recycled just one unwanted phone at the end of its life, it could prevent nearly 2.4 lakh tones of raw material from being mined and result in saving energy and reducing greenhouse gases by as much as taking four million cars off road for a year," says a Nokia India spokeswoman.

The Economic Times, 11 February, 2013, http://economictimes.indiatimes.com/news/news-by-industry/cons-products/food/organic-food-fails-to-move-cash-registers-for-retailers/articleshow/18439059.cms


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